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5 Reasons why you should involve your family in financial matters - Outside View by PersonalFN

5 Reasons why you should involve your family in financial matters

Nov 14, 2013

From our daily routines to other important decisions in life, we share everything with our families. We take their views on matters such as when should we plan the monthly shopping trip or which should be our next holiday destination. However, most people avoid involving their family in one of the most crucial aspects of their lives - 'Finances'; and even if they do involve, they do not discuss in much depth. Discussing financial affairs and decisions with family members are often regarded as unimportant and unnecessary. However PersonalFN is of view that it is in fact very important and the following points will help you recognise eminence of discussing your financial affairs with your loved ones:

Involving your spouse in financial planning: In our country, most financial decisions are taken by the bread earner or the head of the family. In this process, the views of the spouse (usually the wife) are generally not taken into consideration. This may be because the spouse lacks financial knowledge or interest in the financial affairs of the family. However, as irrelevant as this may sound to you, it is extremely important to include your better half while planning or reviewing your financial plans. You might be surprised at the inputs your spouse can provide while planning your finances. The final goals of you and your spouse may remain the same such as educating and getting your children settled, saving for your retirement and medical emergencies and so on. However, her views regarding each goal and how she would prefer them to be realised might be different. For example, your spouse might want to retire in a different city or want your child to pursue a different stream and have a different future from what you may have envisioned. She might be in a better position to understand your child's dreams or her personal wishes. Her opinions about various subjects can bring a great deal of clarity and another perception to your financial plan.

Investments and Liabilities: Nomination is a process where you nominate an individual (usually a family member) to rightfully claim your assets in your absence. Appointing a nominee for all your assets will reduce the hassles faced by your family in case of your death. It is imperative that your spouse knows about all your bank accounts, investments (both financial and physical) and liabilities. This will ensure that she never faces helplessness and is never misled by any of your debtors or creditors in your absence. Make sure that you have disclosed the whereabouts of your life and health insurance policies to your family. This will help them in easily procuring the money when they need it the most. It is also prudent to undertake estate planning and have a will in place as your age progresses to ensure that your belongings can easily be passed on to your spouse or successors. It is also important to make your children aware of the family's assets and the procedure to claim the money in case something happens to both the parents. If you have minor children, make sure that a guardian has been appointed thoughtfully and is one who's trustworthy.

Creating awareness among children: Many of you may have experienced that today's generation is very smart and are fast learners due to their inquisitive acumen. Schools today are also training children about personal finances, but having said that it is imperative involve your children while taking financial decisions for the family, especially the ones that will affect them, and infuse in them the value of money no matter what your economic status is. Today, while most parents want to provide their children with the best education of all, it is imperative to involve the child while creating a financial plan for the said goal. You see, children learn a great deal by observing. Discussions like these will create curiosity in their mind and help them understand the family's financial situation. As parents, the earlier you create financial awareness among your children, the lesser mistakes they would make as they grow up.

Financial Independence: Although involving the family members in handling all the day-to-day finances may not be necessary, it would be prudent to discuss with them the monthly budgets and expenses. You must give your spouse and kids an opportunity to handle some of their personal and household expenses. For instance, let your spouse pay certain monthly expenses if he/she is not already doing so. This will create a feeling of being involved and the ability to contribute to the financial affairs of the family and also help them to become financially independent in the long term. Also most teenagers use mobile phones. Give them a budget for the usage and let them pay for their own expenses from their pocket money. This will help them to appreciate the importance of financial planning and budgeting. It will be easier for them to step into the shoes of the 'finance manager' of the house easily in his/her absence. Make sure that all the vital financial information is passed on to all your family members. This will avoid any confusions and stress in case of any unforeseen contingencies that may occur in the future. Also, be open and honest regarding the financial history of the family. Let your experiences, whether favourable or unfavourable be a teaching lesson for them.

Team Effort: It takes discipline and efforts from all the family members to ensure that the financial goals of the family are fulfilled. You must ensure that you have a meeting with your spouse and children to determine the monthly budget and review the expenses. Only if all the members of the family mutually take efforts for curbing unnecessary expenses and work towards a common goal, can the financial objectives of the family be met. You must discuss and together develop a plan of action; which will increase the chances of bringing your wishes to fruition than only a single person doing all the brain storming. Without team work between members, all these wishes and dreams might never come true.

The important thing to draw is that discussing money matters with family is not a taboo topic. If you have not yet disclosed, then it is high time you started sharing all financial issues with your family before it's too late and discuss it rationally with maturity.

PersonalFN is of the view that including family members in all financial matters is of prime importance in order to accomplish all financial goals and maintain harmony in the family life. A failure to do so might result in costly consequences.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

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